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Pebblebrook Hotel Trust PEB

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Economic Moat




Closed Hotels Cause Massive Drop for Pebblebrook in Second Quarter

Kevin Brown Equity Analyst

Analyst Note

| Kevin Brown |

While we expected a significant drop in no-moat Pebblebrook's second-quarter results, the reported decline in almost all metrics was more severe than we had anticipated. Still, the short-term results don't impact our medium- and long-term outlook for the company's fundamentals, so we don't anticipate making any material changes to our $23.50 fair value estimate. While Pebblebrook managed to keep rate growth relatively stable in the second quarter with only a 0.9% year-over-year drop in average daily rate, occupancy fell to 3.3% from 86.9% in the second quarter of 2019. As a result, revenue per available room fell 96.2% in the second quarter. The company managed to reduce variable expenses by a similar percentage, but fixed expenses like property taxes caused same-store expenses to only decline 75.7% in the quarter. Therefore, same-store EBITDA was negative $40.8 million in the quarter compared with positive $146.9 million EBITDA last year. With other fixed corporate expenses like interest expense, adjusted funds from operations saw a $76.6 million loss or $0.58 per common share, which is worse than our estimate of a $0.34 loss in the second quarter.

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Company Profile

Business Description

Pebblebrook Hotel Trust currently owns upper-upscale and luxury hotels with 14,013 rooms across 56 hotels in the United States. Pebblebrook acquired LaSalle Hotel Properties, which owned 10,451 rooms across 41 U.S. hotels, in December 2018, the company current Pebblebrook CEO founded in 1998. Pebblebrook's portfolio consists mostly of independent hotels with no brand affiliations, though the combined company does own and operate some hotels under Marriott, Starwood, InterContinental, Hilton, and Hyatt brands.

4747 Bethesda Avenue, Suite 1100
Bethesda, MD, 20814
T +1 240 507-1300
Sector Real Estate
Industry REIT - Hotel & Motel
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 58